Disney Cites Subscriber Losses for ESPN Profit Tumble

As Walt Disney Co. reported an 11 percent jump in profit in its second fiscal quarter. The company’s media networks unit, which includes ESPN, had a tough quarter. Operating income fell 3 percent to $2.2 billion, which Disney attributes in part to higher programming costs and subscriber losses during a period of upheaval in the television business.

“ESPN is the biggest challenge for the company right now,” Robin Diedrich of Edward Jones Research is quoted as saying by The Los Angeles Times. “It is a challenge to navigate that transition period, because consumers are shifting.”

Boosted by several hit films and growth in its theme parks operation, Disney posted net income of $2.4 billion or $1.50 per share for the quarter ending April 1. Revenue climbed 3 percent to $13.3 billion. The media networks unit’s operating income declined on a year-over-year basis for the fourth quarter in a row. Over that timeframe, Disney has been under pressure to address subscriber losses at ESPN, which has shed more than 10 million customers since 2010, according to Nielsen data. The network went through a round of high-profile layoffs last month that included the departure of some popular on-air personalities.

“We’re managing that business efficiently,” Chief Executive Robert Iger said on a conference call with analysts. “We always have.”

ESPN needs to grow its revenue base to keep up with the escalation of sports rights costs at a time when a traditional revenue source — cable affiliate fees — is under threat by so-called cord cutters and the move to smaller cable bundles. Iger touted ESPN’s inclusion in the offerings of streaming television providers such as Sling TV, which have enticed younger consumers.

“We’ve seen really nice growth there, but the growth that we’ve seen in number of [subscribers] so far has not made up for the losses that we have seen in the expanded basic [pay-TV] service,” Iger said.

This story first appeared in the blog, The Sport Intern. The editor is Karl-Heinz Huba of Lorsch, Germany. He can be reached at ISMG@aol.com. The article is reprinted here with permission of Huba.

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